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Thursday, April 15, 2010

Beer Taxes: How much is the government taxing your beer?

This post is fitting given that today is the deadline for individual federal tax returns here in the USA (unless you’re like me, being in a state affected by the recent flooding where Obama has kindly given us a 4 week extension). With all the paperwork and number crunching associated with these returns, it got me thinking about how much money government officials are receiving from taxes buried in the price of the commercial beer I purchase (i.e. excise taxes, etc).

The answer, it turns out, depends greatly on where beer is sold given that excises tax rates greatly vary from state to state. Alaskans, for example, have the misfortune of paying the highest state excise tax - $1.07 per gallon, while Wisconsin and Missouri share the lowest excise tax rate - $0.06 per gallon. But what the hell does 'state excise tax rate' really mean to the consumer? How much am I personally paying each year as a beer consumer?

To get an idea of what different state resident pays for “beer taxes”, I took the individual state excise tax rates and multiplied it by the annual per capita beer consumption for each state. The results indicate what an average individual would be paying out of pocket (in the form of margins built into the retail beer price) each year in state levied “beer taxes”. While the range of annual expenditures is not a large burden, the relative differences between states can be very dramatic. (For the purposes of this post, the reference to "states" includes the 50 US states and the District of Columbia.)

Top 5 States with the Highest “Beer Taxes” Paid Per Capita
1. Alaska ($32.64 per resident)
2. Hawaii ($30.97 per resident)
3. South Carolina ($27.95 per resident)
4. New Mexico ($16.15 per resident)
5. Alabama ($16.06 per resident)

So according to all this number crunching (the full dataset presented below), I’m only paying $2.90 per year to the lovely Ocean State in “Beer Taxes”. Of course this doesn’t cover the federal taxes levied or sales taxes lumped on top of the retail price, but overall these numbers are showing that Rhode Islanders are actually doing quite well. As a comparison, for example, the beer drinkers in Alaska, Hawaii and South Carolina are paying just about 10x what we pay here in RI. So for every dime I pay in "beer taxes", the residents of these states are dropping down a full dollar on the counter.

And of course, in good fraternal rivalry, I’m happy to my New England state of Rhode Island (#42) is only paying 40% of the taxes that my brother Tom has the privilege of paying down in Virginia (#18). Right on.

One interesting thing is that Utah is only 17th in the list, but in terms of cost per gallon, we would be up with New Mexico. Given the high Mormon (LDS) population here* there is a lot of beer being consumed by a minority. The consumption per resident is only 19.1 gal, but about half the population doesn't drink. Also, a lot of that tax is being lost due to smuggling out of WY, NV, and AZ where there are lower taxes and better selections.

*As of 2007, the percentage of Utahns that are counted as members of The Church of Jesus Christ of Latter-day Saints was 60.7 percent of the state's population and only 41.6 percent of them are active members.